Monzo is now a bank, but we started out as a prepaid card based on another bank’s license and card processor. I don’t think we even had cards at first—we just had an API where you could move money around. I think we gave out 15 demo cards at a hackathon. We invited people from our waiting list to come by and see what cool apps they could build atop our API.

And we gave out probably 50 cards the week later. And maybe 50% of the core account functionality worked, but at least 50% was still missing. So I absolutely do not regret launching that early.

It’s like a superpower. When you have no real reputation, you can just put it all on the line and build a lot of customer love by launching early.

What were your early growing pains as the company started to get traction?

There are some really funny ones.

Everything breaks multiple times as you grow, and there are a few that spring to mind. For example, we initially mailed out all of our plastic prepaid cards from our office. So somebody would sit and stuff them into envelopes before the 5pm deadline. And way more often than we’d like, it was 4pm on a Friday and we’d be like: “Crap, we need to send out 3,000 cards in one hour.” And so we’d have the whole team stuffing envelopes. And I mean everyone—me, the CFO, everyone. It was kind of stupid but we had to do it.

We had the same sort of thing for customer service as well. When we had big surges in customer reach outs, we’d have literally the whole company—the CEO, the CFO, everyone—on customer service, on Twitter, answering calls.

Can you talk about your early fundraising days? What worked and what didn’t?

So the first thing to say is that, depending on how you count them, this is my third company, which is kind of cheating. The way to fundraise really well for your company is to do it for two other companies first. 😂

And then it becomes somewhat easier—though again, only in relative terms, because it’s still excruciatingly painful. So, the fact that I’d done a couple of companies previously, they’d both gotten into Y Combinator, that helped a lot.

So for our seed round, we went to a firm in London that I’ve known for 8 or 10 years, and just said: “Hey, we’re starting a bank and need a couple million pounds.” And relatively speaking, it was pretty quick to wrap up.

The subsequent rounds have been much harder. None of them have been super, super easy.

You know, as a founder, you read about these super, super hot rounds where Kleiner Perkins is bidding against Sequoia who is bidding against Andreessen and it ends in these massive valuations. And you have to remember that these are a tiny, tiny, tiny minority of rounds.

If you can get a single investor to give you a single term sheet, you are already far ahead of most people. Most people never get their first term sheet and just die a very silent death.

So comparing yourself against the mega round that some other company just raised—that’s just kind of dumb.

You’re always going to feel bad if you do that.

Yeah! There’s only maybe one or two or three of those rounds per year, and it’s not worth chasing. So the lesson I always come back to is: “Build something people want.” Launch a product that gets traction and people are happy to pay for it and it grows organically. That‘s the easiest and the hardest thing to do.

How did you decide that now is the time to get your banking license?

So, we started on day one. We started the company with the intention of getting a banking license. And it was a convergence of a few things.

For one, there was a change in the banking regulations in 2013 that lowered capital requirements. And there was this document that explained how to start a bank which made things easier.

The government was also talking about launching new banks, and the regulators were changing the capital requirements. I personally had built this company called GoCardless, which is a direct debit processor. So I knew how payments moved around the system.

I also had just gotten sacked from my last job at a dating startup. 😂

And so it was the convergence of those things that all came together that led to Monzo and starting a bank.

But how did you develop the connections needed to build a bank?

One thing that our regulators do very well is they’re very approachable. They publish a guide to starting a bank. It’s literally on their website!

So you don’t have to be super well connected, politically, to start a bank. It’s still very, very hard, but you just have to be very determined and follow the process.

I wouldn’t say we’re super well connected. We just went in the front door and followed all the rules and kept working at it and didn’t try to take any shortcuts.

Banking is an incredibly regulated industry. How did you tackle the partnerships and regulations early on?

We took different approaches for those two things.

For partnerships, we tried not to partner too much, we tried not to outsource too much. Every time we outsourced something to a partner, it tended to go wrong. It didn’t work very well. Legacy banking technology is expensive and slow and doesn’t really do what you want. So we had a lot of success bringing it in house.

And by the way, when I say outsourcer, I mean a partner that doesn’t work very well. So there were a few notable exceptions. Stripe was a partner that worked really well. It doesn’t feel like an outsourcer. It just feels like how card acquiring is supposed to work. It goes on in the background and it never fails and that’s super cool.

So, Stripe is a genuine partner and we haven’t thought about replacing it because it just works so well. On the other hand, we replaced our processor on the issuing side because they were an outsourcer in the old school sense of the word. And so we brought more and more of that in house and it worked much, much better.

On the regulatory side—oh gosh, it’s funny. Investors sometimes say: “It’s so easy to get a banking license in the U.K.” And that is not true!

It used to be impossible to get a banking license in the UK, and so relatively speaking, yes, it is easier now, but it’s still excruciatingly difficult to get a banking license. So it took us 2.5 years and probably 10,000 pages of documents by the end of it. And when I think about it, we had a few principles that helped us get through it.

One of them is that we went in really, really early, and we engaged with the regulators upfront. We tried to understand what their process was and just do it. Rather than expecting them to change in any way, we told them: “We will just do whatever you want, just tell us what to do and we’ll do it.”

We also tried to describe what we were doing in terms that were familiar to them. We didn’t go in and say: “We’re going to change the world!” Instead we went in and said: “We’re like every other bank you’ve ever seen, just with no branches.” And that made it much more palatable.

At the end of the day, regulators have more tolerance for delays than you do. In three years, the regulator can still be going about their job. But as the entrepreneur, if you haven’t solved the problem in three years, your company is dead. So there’s a lot more incentive for you as the entrepreneur to change to meet their requirements than the other way around.

Advice and reflections

What challenges have you personally faced as CEO as you scaled Monzo?

I’ve found it challenging to deal with personal stress and anxiety and staying on top of my mental health. It’s a combination of factors: I’m super super busy at work, so I stop exercising; I have a bunch of investor dinners so maybe I’m out every evening drinking too many glasses of wine; and then I feel worse the next day and it gets worse and worse and worse and worse. And I spiral down into a physically and mentally bad place, where I have to rely on a cofounder to drag me out of it. It’s great to have people you can rely on, but dealing with that kind of pressure and not letting it break you down is super hard.

People are talking about this a bit more now. It’s like, there’s this image of the superstar founder who’s doing a million things—getting up at 5am, going jogging in a redwood forest, and then getting to the office and crushing it. But that image is super unhelpful and makes things quite hard.

The second thing is that what makes you really successful as the founder of a five or ten person startup is very different from when you’re at 350 people. The skills are super, super different. Even managing people who want to join a 10 person startup versus who want to join at a senior leadership level at 350 people is very different.

You get different personalities coming in. They index much more towards being super agreeable and consensus building as you get much larger, and so retaining the right sense of urgency and bias to action while not being a total asshole is quite important.

And again, that’s much easier when you’re on your mental A-game and everything is going well and investors think you’re awesome and your metrics are looking good and the press thinks you’re great… but as soon as those things start to go down, you can revert back to just being an asshole sometimes if you’re not careful.

How important is domain expertise?

Domain expertise is like 10 percent of the input. And typically, domain experts just teach you about the screwups they made to help you not repeat them. But most genuinely impactful companies start from scratch and figure it out.

I’d say, out of the 350 people at Monzo, probably only 10 or 20 have ever worked in a bank before. It’s good to have these people around, maybe even as consultants.

What we typically found in the early days is that you get some industry expert in for two days, and you suck all the information out of their brain, and then they’re like a shriveled up grape and they’re not that useful anymore.

Rather than search for domain experts, we try to find people who are incredibly thoughtful and smart and self-directed. People who can keep working on a problem until it no longer exists. And domain expertise is a good input for those people to have, but it’s not necessary by any stretch.

I’d prefer to have a bunch of really smart and driven people than a bunch of domain experts who are low energy.

How can a company know that it’s making the right decisions?

You know, I think we’re pretty good at making reversible decisions quite quickly. And in general, decisions should be made really, really fast. If you’re not sure about something, just launch an experiment quickly and let the data tell you.

The best companies don’t magically have the best intuition, they’re the best at figuring it out from data. They are the most rapid experimenters.

How should a small startup think about partnerships and PR?

As a small company, talking to big companies about partnerships is generally a waste of time. You can literally waste years on it.

Landing big press stories is similar. You can hunt for months to get a journalist to write a story, but we hardly even see a dent in our numbers. We could appear on BBC Television or in The Guardian and it doesn’t even show as a blip in our signups. It’s just not impactful.

Besides MRR and ARR, what key metrics would you encourage a young startup to keep an eye on?

Retention is my favorite one. I think it’s too easy to focus on new user acquisition and then ignore retention.

It’s important to look at retention on a cohort basis. If I sign up 100 users in January, how many of those 100 users are still using it in March, April, or May?

And then for each subsequent month, you can draw these cohort graphs that are super, super useful to tell you if you have something sustainable or not. Do these cohorts plateau at some point? That’s your core of long-term retained users. Or does each cohort just plunge to zero after a month or two? Then you’ve got a problem.

You can have the fastest growing business in the world, but if you retain zero of them you’re eventually going to die.

Do you consider it important to invest in technical infrastructure like servers and security in the early days of a company?

I think in many cases you can probably rely on partners to do much of that. Heroku, AWS. It’s probably not your biggest problem.

Now, we’re running a bank and it’s really important that we don’t get hacked and we don’t lose people’s money. It’s really, really important that that doesn’t happen. Most companies aren’t banks, though, and their biggest problem isn’t the possibility of getting hacked—it’s about, can you build something that people actually want?

So, using a platform like Stripe, for example, to take care of your payments so you don’t have to worry about PCI compliance is a great thing. Or Heroku or Amazon—generally speaking you’ve got default options that are pretty good now. Don’t try to do it all yourself.

Revolut seems to be going for as many countries as possible with their current offering, but it seems like Monzo is trying to build more and more value for its current market before expanding. What’s the strategy there?

I think Revolut is doing a really good job with their approach. I think the difference in strategy really speaks to the difference in our products.

Monzo is about day-to-day, week-to-week, month-to-month visibility and control of your core finances. Our average customer is someone who works hard, is paid a decent salary—not a crazy salary, but a good salary—but who worries about meeting their rent at the end of the month. And so they want to really keep track and know where everything is and get peace of mind that everything just sort of works.

We’re trying to replace the core checking account experience for them. They probably have a bank already and we’re trying to replace that. So the bar of the service that we need to provide for them is super high. So we really need to have a product and customer service experience that is very on point. And our brand and focus and incentives needs to really be aligned with our users in order to make them switch away from their existing current account.

Revolut is different. Because they’re going for dramatically underserved niches, their prospective customers often don’t really have many other options. And so they don’t need to invest as much in market X before expanding to market Y. And so you can just enter a country like Poland, and for mainstream customers, Revolut is now the easiest way, by far, to trade cryptocurrencies.

So since there’s not a lot of existing competition, they can just go fill all of these product niches and get great adoption. But it’s quite a different experience than Monzo, where we’re really trying to be at the core of a customer’s finances, whereas for Revolut I think it’s more trading crypto, trading FX, and less focus on the salary, rent, and bill pay kind of use cases.

How do you convince skeptics to jump over that hurdle and trust this thing called Monzo?

We don’t say: “Switch your salary and your entire life savings over on day one.” We just say: “Put 50 bucks in and try it out.” And the next time you’re out at dinner with friends, you can pay with Monzo and you can see how splitting the bill works.

It’s like stepping stones. After 50 bucks, the next month try putting in just your disposable income. Not your rent and your bill payment, just the 400 or 500 bucks you’re going to use to live your life this month. Just put that in and then use our budgeting tool to see how easy it is to stay on track.

So it’s a gradual upgrade process where the goal is clearly getting the salary. It’s like getting married. You don’t propose on the first date. You just say: “Hey, let’s go for a drink.” But eventually you reel them in!